PA president returns to West Bank after UN upgrades status of Palestine to nonmember state with observer status; some 5,000 people welcome Abbas with Palestinian flags and balloons.

Crowds welcomed President Mahmoud Abbas back to the West Bank on Sunday and celebrated the United Nations General Assembly's de facto recognition of Palestinian statehood.

"Abbas, onwards, we are with you until liberation," flag-waving Palestinian well-wishers chanted at their president, returning from the assembly which voted 138 to nine with 41 abstentions on Thursday to implicitly recognize Palestine.

Abbas' Palestinian Authority, which exercises limited self-rule in the territory Israel captured in the 1967 Six-Day War, gave civil servants half the day off to attend celebrations at the presidential headquarters in the West Bank city of Ramallah.

The festivities included a ceremonial release of balloons in the red, green, white and black colors of the Palestinian flag into the sky. Palestinian onlooker Mohammad Stayyeh said he was there "to thank the president for the historic achievement and dream that he achieved for us and our children".

Reveling in his most stunning diplomatic achievement in years, Abbas waved at the crowd and said, "the recognition of Palestine as a state changes a lot of facts, and aims to establish new ones."

He suggested though that in the absence of a peace deal with Israel, the largely symbolic UN decision may have limited impact on the ground, at least for now.

"We have to recognize that our victory provoked the powers of settlement, war and occupation," Abbas said, alluding to an Israeli decision announced on Friday to build as many as 3,000 new settler homes on land Palestinians want for a state.

The United States joined Europe in denouncing the planned settlement expansion as counter-productive to Israeli-Palestinian diplomacy, frozen since 2010.

Israel, reeling from the UN vote it saw as a diplomatic blow, told the Palestinian Authority in the West Bank on Sunday it would withhold Palestinian tax revenues this month worth about $100 million, a step that would add to the cash-strapped authority's economic woes.

The authority largely depends on the tax money to pay the salaries of some 153,00 civil servants.

Israel has charged that merely by approaching the U.N. for recognition, the Palestinians violated past agreements it says bind both sides to avoid taking unilateral steps instead of seeking negotiated settlement.

Palestinian celebrations were also marred by a political split in their ranks, between Abbas, whose Western-backed Fatah movement holds sway in the West Bank, and Islamist rivals Hamas, who rule the Gaza Strip.

Hamas' leader in exile, Khaled Meshal, has told Reuters he plans an historic visit to Gaza next week in honor of Hamas' 25th anniversary. Hamas rejects Israel's right to exist, and unlike Abbas's Fatah refuses dialogue with the Jewish state.

In his speech, Abbas said "reviving our national unity" was one of his goals ahead, and the crowd chanted calls for "an end to division".

Meshal, in his remarks to Reuters in Qatar on Friday, suggested Hamas's conflict with Israel last month, in which 170 Palestinians and six Israelis were killed, had enhanced the Palestinians' diplomatic position.

He challenged Abbas to make the UN step a "part of a national Palestinian strategy that includes [armed] resistance".